Suppose that the one-year U.S.interest rate is 13% and the one-year Swiss interest rate is 2%.If the current spot rate is $1.40 per Swiss franc,what must the one-year forward rate $/SFr be according to the approximate covered interest parity?

Question

Quizplus · Accepted Answer

The approximate covered interest parity formula is F = S * (1 + i_d) / (1 + i_f), where F is the forward rate, S is the spot rate, i_d is the domestic interest rate, and i_f is the foreign interest rate. Plugging in the given values: F = 1.40 * (1 + 0.13) / (1 + 0.02) = 1.40 * 1.13 / 1.02 ≈ 1.470.

Suppose That the One-Year U